htmlOn December 12, Tesla closed at $167.82. Since Musk announced its acquisition of Twitter in April this year, Tesla's stock price has fallen by half. As the stock price has been falling, Musk briefly lost the position of Forbes as the richest man in the world a few days ago.
1. There are three reasons for Tesla's decline:
1. From the overall U.S. stock market, technology stocks overall pullback in 22 years:
As can be seen in the figure above, there are many technology stocks that have fallen by more than 60%. Tesla is on the decline list of the technology sector and cannot even rank in the top 10. As can be seen from the figure below, Amazon and NVIDA also fell by more than 40%.
The technology sector's pullback is due to the excessive rise in the past two years of the epidemic and the high valuation. But specifically speaking on stock , it is still necessary to see whether the valuation is reasonable and whether it is bought based on future growth and profits. However, this also reflects the fact that Tesla is no longer a model student in growth stocks. Compared with this, the stock price of Apple fell by 19% this year.
2. With the increase in the penetration rate of electric vehicles and the continuous increase in Tesla's sales, everyone is uncertain about whether Tesla can continue to grow rapidly in the future.
Recently, Tesla's market news has shifted from a supply shortage that has lasted for many years to a price war. Even, according to previous Reuters news, Tesla's Shanghai factory may cut production capacity by 20% in December. Although Tesla subsequently denied it, the news still caused the stock price to fall by 6.37%.
In the middle of this year, according to Troy Teslike's analysis report, as of the end of July, Tesla's order backlog was 504,000 units, which has been ranked in 2023. By the end of September, the backlog of orders had dropped sharply to 317,000 vehicles.
Although Tesla's sales in the Chinese market still achieved double-digit growth in November, it also faces increasingly fierce competition, and the production capacity of Tesla's super factory is accelerating.
On the other hand, the overall supply and demand relationship of electric vehicles seems to be changing. In the past two years, the penetration rate of electric vehicles has been soaring, greatly exceeding previous expectations. However, since October this year, the penetration rate has not increased.
According to data from the China Passenger Car Association, the penetration rate of electric vehicles in the Chinese market was 5.8% in 2020, 14.8% in 2021, and exceeded 30% in one fell swoop by 2022. However, although it was still as high as 30.2% in October this year, decreased by about 1.67% month-on-month compared with .
Some analysis pointed out that this round of electric vehicle penetration has increased significantly, and the demand for online car-hailing, bus rental and other operational categories accounted for a high proportion, but the growth space for this market is limited. On the other hand, the efforts that electric vehicle manufacturers can make have reached a peak. Since the beginning of this year, many brands have been under pressure from rising raw materials and have to announce price increases.
Overall, the decline in market demand will be the biggest pressure on Tesla's stock price in the future.
3. Twitter-related concerns:
Musk is selling more Tesla's stock to maintain Twitter's one-year burn rate is about $2-3 billion, but it should be optimized soon. Twitter should also raise another $3 billion. But for Tesla's market value and stock trading volume, this amount of funds is not worth mentioning.
In addition, there are also concerns related to Twitter. The current news and public opinion on Twitter is causing damage to Tesla's brand, but it does not affect the favorability of the Internet. It may be only temporary and unlikely to affect loyal fans. They are the real buyers of Tesla.
Some people are also worried that Musk will be distracted by Twitter. Can this person who operates and inspires Tes, SpaceX, Boring Company, Neuralink and Open AI (now left) be distracted by Twitter?
2. Whether can buy the bottom
can buy the bottom depends on the judgment of Tesla's reasonable stock price. Many people doubt Tesla's market value of hundreds of billions and trillions of dollars, and believe that there is a likely return to valuation in the future. After all, the peak market value of traditional cars such as Toyota is only more than 200 billion.After Tesla's decline, its market value is still above 500 billion.
Tesla delivered about 500,000 vehicles in the latest quarter, and its current sales are about 2 million vehicles per year, with an average price of about 50,000 US dollars. The sales ceiling of a multi-brand car company is 10 million vehicles per year, with an average price of US$30,000. Brands like , Mercedes-Benz, , BMW, which have an average price of 50,000 US dollars, have a sales ceiling of 2-3 million vehicles per year. We think this is a very reasonable logic, and electric vehicles cannot be broken. So if you want to break through to 10 million vehicles per year, Tesla's average price may have to drop to around 30,000 US dollars.
But it should be pointed out that Tesla's logic is not just about making cars. It can also sell software and autonomous driving. Therefore, we cannot only use the valuation logic of car companies to look at Tesla. We must put traditional cars and software services together. At the same time, Tesla, , BYD and other new energy vehicle companies are still growing. It is normal for valuations to be higher in recent years, but in 5-10 years, it will inevitably change from a fast-growing enterprise to a stable growth type.
Assuming that Tesla's sales growth rate will be 50% in the next five years, this is also a flag that Musk set up himself, which will maintain a 50% growth rate for a long time (the latest quarter was 44%). Then by 2027, sales will reach about 10 million vehicles, which will reach the ceiling share we mentioned earlier. To achieve this share, the average price must drop, which is normally $30,000, and we assume that Tesla is $35,000.
In addition, Tesla is a car that can sell software, so we also count the penetration rate of autonomous driving. As estimated before, it may be 5% globally. Assuming that FSD reaches a penetration rate of 15% in 5 years, that is, 15% of 10 million vehicles a year, that is, the FSD of 1.5 million vehicles, multiplied by the software price.
again look at the profit. In terms of automobiles, the gross profit may go a little further after the average price drops, but we still assume that it is a bit higher than the 18%-20% gross profit margin of traditional car manufacturers; the gross profit of software will be very high, more than 70%. Overall, Tesla may maintain its overall gross profit margin level in five years, which is 26%-27%. This way, combined with 9% of operating cost and the corresponding tax rate, the estimated net profit of Tesla in 2027 is about 50 billion US dollars, and the corresponding net profit rate is 14%, higher than the industry.
is followed by PE. Considering the software and the possibility of growth in the future, we give a PE of 50% higher than the industry - 15 times. The corresponding market value of Tesla in 2027 may be more than 700 billion, which is converted into a stock price of US$250. If you calculate it back at at 10% discount rate, it will correspond to the stock price of more than 150 US dollars today.
Although judging by this valuation, the current stock price is not cheap. However, the history of countless growth stocks has proved that if Tesla can maintain a 50% growth rate in the past five years, then it is no problem to maintain a 40-50-fold price-to-earnings ratio during the growth process. Of course, after the high growth is over, it will gradually return to a normal price-to-earnings ratio of 15-20 times. Therefore, is calculated based on the EPS (Earnings per Share) of US$7.76 in 2023. The current price-to-earnings ratio is 22 times, and there is still a lot of room for growth before the 50 times price-to-earnings ratio. Of course, the premise is that Tesla will continue to maintain a high growth rate in the next five years.
